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Retirement Plan Investments Toolkit
Practical Law Toolkit w-019-8375 (Approx. 7 pages)
Retirement Plan Investments Toolkit
by Practical Law Employee Benefits & Executive Compensation
| Maintained • USA (National/Federal) |
Resources to assist plan fiduciaries with retirement plan investments under the Internal Revenue Code (Code) and the Employee Retirement Income Security Act (ERISA).
Fiduciaries of a retirement plan are responsible for the investment for plan assets and must comply with the rules in the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (Code) that apply to plan investments.
There is no list of investments that are permitted for qualified retirement plans, though some investments are prohibited. Plan fiduciaries of a qualified retirement plan must:
- Exercise the judgment that a prudent investor, familiar with such matters, would use when selecting plan investments.
- Diversify plan investments so as to minimize the risk of large losses.
(ERISA § 404(a)(1), 29 U.S.C. § 1104(a).)
There are many ways that plan fiduciaries can reduce their risk for plan investments, including:
- Maintaining an investment policy statement for each retirement plan.
- Providing a diverse investment menu.
- Utilizing a qualified default investment alternative in defined contribution plans.
- Hiring an ERISA § 3(38) investment manager.
Different rules apply to plan investments depending on whether the plan is a defined benefit, defined contribution, or employee stock ownership plan. For example, for defined contribution plans there are limits on employer stock and real property that the plan can hold.
In addition, the prohibited transaction rules under ERISA and the Code prohibit certain retirement plan investments. The Department of Labor (DOL) has granted class exemptions for certain types of investments. Plan sponsors may also apply for an administrative exemption with the DOL for investments that would be prohibited transactions.
This Retirement Plan Investment Toolkit provides several continuously maintained resources designed to help plan sponsors and fiduciaries comply with the rules that apply to retirement plan investments.